UnitedHealth Group adapts to the changing healthcare system through optimal investments

The US health care system is in a state of flux as the home gains prominence as a care setting and value-based payment gains momentum. Recent deals by UnitedHealth Group (NYSE: UNH ) subsidiary Optum demonstrate a willingness to change with the times.

UnitedHealth Group is positioning Optum as a cornerstone of its growing home care infrastructure and expanding delivery of value-based services.

The Minnesota-based insurance giant has deployed billions in capital to bolster Optum’s capabilities through a number of high-profile acquisitions, including health technology firm Change Healthcare and home health and hospice provider LHC Group (NASDAQ: LHCG ).

“The recent combination of Optum Insight and Change Healthcare reflects our accelerating efforts to help create a more efficient and simplified experience for consumers, payers and care providers while reducing costs across the healthcare system,” said UnitedHealth Group CEO Andrew Whitty on the third quarter earnings call. “Another tenant of our consumer focus is meeting people where they are, which includes expanding our clinical capabilities to care for people more holistically in their homes.”

Through these efforts, UnitedHealth Group plans to reduce its healthcare costs by helping patients stay in a lower-cost home environment and preventing avoidable high-acuity hospitalizations. In doing so, they further develop and scale their medical, behavioral, home health and palliative care capabilities, according to Witty.

A federal court recently cleared the way for Optum to proceed with its planned Change Healthcare transaction after the US Department of Justice raised antitrust concerns. The $13 billion deal closed earlier this month.

Change is a healthcare technology, insights and data platform. The marriage of Change and Optum’s Insight business is expected to inform and improve the combined company’s clinical, administrative and payment processes, accelerating healthcare decision-making, improving outcomes and reducing costs.

“Overall, Change offers a robust transaction network built on strong payer-provider connectivity,” UnitedHealth Group President and COO Dirk McMahon said on the earnings call. “Together, our areas of focus include first, improving the quality of healthcare delivery by offering insights into critical points of care, aligned with evidence-based medical standards, within the physician workflow, second, simplifying administration through fully automating claims transactions.”

The integration of Change and OptumInsight will also “reduce friction in the payment process” by providing patient benefits and payment obligations upfront, according to McMahon.

Beyond the technology investment, the upcoming deal with LHC Group represents a qualitative leap for Optum’s entry into home settings, including hospice and palliative care.

Optum announced the acquisition of LHC Group for $5.5 billion in April. The Lafayette, La.-based home health and hospice provider’s 30,000 employees provide hospice, home health, home and community services and senior living facility care in 37 states and the District of Columbia.

UnitedHealth Group has also made significant investments to expand Optum’s behavioral health capabilities, including the acquisition of Refresh Mental Health for more than $1 billion earlier this year.

“We know that home care settings—especially for people with mobility challenges and highly complex health care needs—can improve outcomes, enhance the patient experience, and lead to better care,” Whitty said. “So we’re bringing together teams with medical, behavioral and palliative care expertise in addition to our OptumRx home infusion capabilities. By doing this, we are helping patients and their families manage multiple chronic conditions while significantly reducing the need for acute and post-acute care – a real positive for them.”

These factors are also really positive for UnitedHealth Group. In addition to the influx of new insurance beneficiaries, Optum was a major driver of the company’s revenue growth in the third quarter.

UnitedHealth Group’s Q3 2022 revenue was $80.9 billion, up $8.6 billion (12%) from the prior year, driven by double-digit growth at both Optum and UnitedHealthcare, the insurance division of the parent company.

Specifically for Optum, third-quarter revenue rose 17% to $46.6 billion year-over-year, driven by growth in value-based care plans and continued expansion of care delivery platforms. These include home, clinic, ambulatory surgery, behavioral and digital health services.

Further expansion through a diverse range of acquisitions is likely to continue, according to Whitty.

“In terms of our capital deployment growth, we have very significant standing capacity. And obviously the market is starting to get interested in that space,” Whitty said. “The array of opportunities is probably as diverse as we’ve seen across a number of key growth platforms.”

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